My wife and I both had condos when we got married so we rent out her's to a friend of mine. Do most people depreciate rental properties for tax purposes? I just claim the net income now which is easy. Seems like maintaining a depreciation schedule would require hiring a tax professional.

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Posted by GoIrish02

Member since Mar 2012

1386 posts

Posted on 9/27/17 at 1:18 pm to Kemosabie

Divide your basis by 27.5 years, add to schedule E for every year you rent. You won't need help until to you have to recapture when you sell it. Then get ready to be shocked.

This post was edited on 9/27/17 at 1:40 pm

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Posted by baldona

Florida

Member since Feb 2016

20383 posts

Posted on 9/27/17 at 3:02 pm to Kemosabie

How much are you talking about? As said its 27.5 years, but its only the actual property not what the land is worth which may or may not be easy to determine.

Yes almost everyone depreciates, many times you will break almost even on taxes outside of your depreciation. So a $300,000 condo with $50k of that being land will depreciate roughly $9,000/ year. So yeah, it adds up quick. The only difficult time is the first year, after that its all basically the same.

You can also depreciate any major expenses over $2500 like AC's, roof, etc.

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Posted by Kemosabie

Atlanta

Member since Oct 2008

20 posts

Posted on 9/27/17 at 4:28 pm to baldona

So it's a bit more nuanced. My father in law bought it for my wife a few years back for $80k and put it in her name. Only contingent was he get paid back when she sold it. So I paid him to make him whole so that I could rent it out. So there is no mortgage. I only net about $7k a year after expenses. I figure I could sell it today for at least $160 which sounds like the recapture hit would be pretty high. Additionally, I'm hoping to avoid capital gains tax by selling it within 3 years.

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